Grocery Delivery Startup Instacart Rings Up $44 Million in Funding

Instacart, one of a cadre of startups promoting the concept of same-day delivery, is getting a $44 million shot in the arm from a group of investors including Andreessen Horowitz and Sequoia Capital.

The funds will help the San Francisco grocery delivery company to expand to seven new cities by the end of this year, bringing its total to 17, said Chief Executive Apoorva Mehta. He said the funds would also help expand his full-time staff from about 60 to 120.

Instacart delivers groceries from stores like Costco, Kroger and Whole Foods as quickly as within two hours, generally for $3.99 per order. The company dispatches couriers to the stores who buy the groceries and bring them to customers’ doorsteps, profiting in part from a markup it charges on stores’ goods.

Same-day delivery has been a hotbed of investment in recent years, with eBay, Wal-Mart, Google and startups like Postmates betting that customers will pay for the convenience of avoiding doing their own shopping. As well, Amazon.com’s Fresh grocery delivery service is set to expand beyond its current three cities to compete with others like Fresh Direct and Peapod.

“The difference is that we can maintain a low cost to operate because we don’t control the inventory,” said Mehta.

The latest funding brings Instacart’s total to about $55 million since it was founded in 2012. Additional investors include Khosla Ventures, Canaan Partners as well as Box CEO Aaron Levie and Sam Altman, president of startup incubator Y Combinator.

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